January 17, 2017

Breaking a Promise

Yesterday, I talked about eight pricing tiers (you might have 28, who knows, no right/wrong answer here).
  1. Full Price.
  2. Liquidations.
  3. Specials.
  4. Rewards.
  5. Shipping Promotions.
  6. Promotions.
  7. Inconsistent Pricing.
  8. Lies.
It has been my experience that companies that break a promise across pricing tiers are companies that are set up for long-term struggles.

Think about JCP. They moved down the chain, focusing primarily on (6) and (8) for success. Over time, they built a customer base that loved (6).

Then JCP broke the promise. They offered everything at full price (a low price, but still, the low price became the full price). Sales dropped 30%.

Notice that sales didn't (and haven't) recover when JCP went back to business as usual.

You could look at Lands' End under Sears ownership ... they promised to never artificially inflate a price to create a sale ... Sears undermined that strategy, moving the company from (1) to (3) and (5) and (6). Once you move a customer down the pricing tier hierarchy, it is very difficult to move the customer back up to the top of the hierarchy.